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Newmont predicts gold and dollar will re-couple and expanding margins

Despite a nearly 50% decline in net income, Newmont is maintaining its outlook this year for equity gold sales and costs per ounce.

Author: Dorothy Kosich
Posted: Friday , 01 May 2009

RENO, NV -

Newmont Mining President and CEO Richard O'Brien says the company has noted a decoupling of the traditional relationship between the weak U.S. dollar and gold prices.

However, O'Brien expects them to re-couple in the near future, bringing the inflation risks that will continue to prompt investors to invest in gold. In fact, investment demand continues to support gold prices despite other factors, he noted.

In a conference call to discuss Newmont's financial results Thursday, O'Brien said a recent arbitration ruling pertaining to Newmont's divestiture of part of its ownership in Batu Hijau's parent company PT Newmont Nusa Tenggara "provided clear direction as to whom we shall sell." Essentially, Newmont has to sell a 51% stake of Nusa Tenggara by 2010 to whomever the Indonesian Government designates, even if that party is a potential competitor of the Denver-based gold company.

During the conference call, O'Brien said the company will maintain its 2009 outlook for equity gold sales of 5.2 million pounds and 5.5 million pounds and cost applicable to sales of $210 to $230 per ounce.

"Our operations provided solid results that were in-line with our expectations and this performance sets us up well to deliver on our operating plans for the full year in 2009," O'Brien said in a news release. "Completing our Boddington project by mid-year and successfully ramping up to commercial production is a clear driver of 2009 performance."

Adjusted net income for the first quarter of this year was reported at $208 million or 44-cents per sale, down from the $381 million (85-cents/sh) reporting during the same quarter a year ago.

"Lower commodity prices relative to last year both hurt and helped our performance in the first quarter," O'Brien said. "Lower copper prices, in particular, negatively impacted our earnings and cash flow. On the positive side, lower than expected diesel costs and Australian dollar exchange rates resulted in lower than expected operating costs and Australian dollar exchange rates resulted in lower than expected costs applicable to sales. If input commodity prices remain at our forecasted levels for the balance of the year and gold stays in the current trading range, we expect expanding margins for the rest of the year."